In college, I studied economics.
While the subject can sometimes help with sleepless nights, the “dismal science” is really a tool that allows you to model and study how the world works.
Unfortunately, it’s also created overly simple models that can lead to disastrous results in the real world…
Just ask anyone following conventional investment advice right now.
Far too many investors today continue to build their portfolio around a model based on just stocks and bonds.
The most typical allocation is the “60/40 model,” which gives stocks a bit more punch in a portfolio than fixed income.
The problem is that this model is a huge simplification.
And worse, it’s outdated in today’s world of high inflation – or what Daily editor Teeka Tiwari calls the New Reality of Money.
Think about it this way…
Conventional financial experts see stocks and bonds as on a seesaw. When one goes way up, the other is likely down… But that hasn’t been the case this year.
The first half of 2022 saw a bear market for stocks and bonds.
In fact, it was so bad that the bond market saw its worst performance for the year’s first half since the Civil War… while the S&P 500 delivered its worst first half since 1970.
Rising interest rates have been brutal for those in fixed income… and record-high inflation and volatility are wreaking havoc on stocks.
Why am I telling you this?
Despite the damage felt in the first half of the year… and dismal prospects for the months ahead… there’s still opportunity in today’s market.
Alternative asset classes have been performing well, even as stocks and bonds have faltered…
And one sector is consistently hitting new highs.
A “Maverick Investment” for $10 or Less
Late last month, a 1952 Topps Mickey Mantle card sold for $12.6 million… the first time a baseball card has sold in the eight-figure range.
That price is 74% higher than the previous price record, $7.25 million for a T206 Honus Wagner card sold a few weeks prior.
This asset class is booming… and it’s because the wealthy follow an investment model far outside the traditional 60/40 split.
Yes, there’s a place in nearly every portfolio for high-growth potential stocks… and income plays in stocks that pay growing dividends…
But in a world where inflation is rampant, these traditional plays won’t cut it for making inflation-beating returns.
That’s why you need what Teeka calls Maverick Investments… things like collectibles, private equity, and crypto.
These ideas go against the grain… break the traditional rules… and often sound more like a gamble than an investment – at least at first.
When Teeka first recommended bitcoin in 2016, it was the definition of a Maverick Investment.
Back then, many viewed crypto as a currency for criminals.
Yet today, billionaire investors are moving into the space. And with a perception that bitcoin is the future of money… that trend is likely to continue.
Collectibles aren’t much different…
Sure, you may not have $12.6 million under the couch cushions to buy your own Mickey Mantle card… But these Maverick Investments have become far easier to invest in over the past few years.
Platforms like Rally allow you to buy a fractional stake in collectibles like baseball cards or luxury automobiles… many for as little as $10 or less…
And Masterworks offers fractional shares in high-end art… another space where prices have soared lately, even as traditional markets have offered poor returns.
In fact, Masterworks just sold a piece by Sam Gilliam for $1.65 million, for which they paid just $770,000 in 2019.
So in about three years, the fractional owners of that piece made a 33.2% annualized return net of costs and fees… enough to turn a $1,000 investment into $2,143.
That’s the kind of return that even wealthy investors in the art space rarely see. And without having to deal with expenses like storage and security.
With these returns, it’s no surprise the wealthy have been increasing their holdings in collectibles… It’s an easy way to build up your investment portfolio and diversify away from stocks and bonds.
A One-Of-A-Kind Chance to Beat Inflation
Platforms like Rally and Masterworks ensure you can get similar returns from the high-end collectible market without breaking the bank.
Even better, these platforms offer you something you can’t get without spending a few million in cash: Ownership of “the rarest of the rare.”
That’s how the wealthy use collectibles to grow their wealth. They’re looking to buy and hold the best, one-of-a-kind assets.
In a world where the printing press has run amuck, finding assets you can’t easily create or reproduce – like a Keith Haring painting or a 1965 Ford Mustang Fastback – offers financial security not found in stocks or bonds.
Given how companies can issue more shares or float another bond issue, that’s a clear win for the collectibles market.
And because the collectibles market sees fewer sales than other assets, prices tend to increase steadily. That makes it far less volatile than other assets.
Even owning a conservative investment like a rental property or a dividend stock in a bear market can be emotionally difficult.
Adding it all up, it’s clear that the collectibles market offers higher returns, less volatile swings, and more unique assets to own over time.
It’s no wonder the wealthy are investing in this asset class – and why investors who stick to simplified portfolio models overlook it.
In so doing, they miss out on an easy way to grow their wealth and beat inflation…
Don’t be one of them.
Analyst, Palm Beach Daily